Central Bank of Switzerland Launching Wholesale CBDC Pilot Test Using Real Money

An official Swiss National Bank (SNB) report dated June 26 revealed that the apex bank would soon launch wholesale central bank digital currency (wCBDC) trials. In an exclusive interview with the Reuters reporters, the chair of SNB, Thomas Jordan, confirmed that the trials for the wCBDC will be launched in the coming days. 

Speaking at the Point Zero Forum held in Zurich, Jordan stated the proposed wCBDC would be available on a regulated Swiss-based platform, SIX digital exchanges. Jordan mentioned that the CBDC would be issued for a limited time.

Nature of Swiss CBDC Pilot Project

He added that the SIX digital platforms own a significant share of the largest stock exchange in Switzerland. Jordan explained that the upcoming wCBDC pilot project would not just be an ordinary experiment. The pilot project will involve real money, which has a similar value to the bank reserves.

Per Jordan’s report, the main objective of the wCBDC pilot project aimed to experiment with the real transaction of digital currency with key market players. He later expressed concerns about the risks associated with retail CBDC that could limit the expansion of financial tools. Jordan mentioned that some of the use cases of the retail CBDC were complex to be regulated. 

In his statement, Jordan confirmed that the SNB would launch the retail CBDC in the future, but currently, the regulators are more hesitant to launch the digital fiat.

In a previous report, SNB board member Thomas Moser asserted that the proposed Swiss CBDC would operate well in the decentralized finance platform. Earlier, Moser stated that stablecoin exposed the user to counterparty risk. He supported the launching of CBDC since there were fewer risks compared to stablecoins pegged to the Swiss Franc.

Moser’s report was released when the SNB team integrated the wCBDC into back-office systems owned by five major banks in Switzerland. The completed integration supported the SNB in completing Project Helvetia’s proof of concept (PoC) for the proposed CBDC. In 2019 the SNB signed a partnership agreement with the SIX Digital Exchange to launch the CBDC pilot test.

Significance of Launching Swiss Wholesale CBDC

Before then, Carlos Lenz, SNB’s chief economist, considered blockchain networks unsuitable for CBDC. He confirmed that the SNB team would not center the its CBDC on the blockchain network.

During last week’s Point Zero forum, the SNB officials announced that the CBDC has limited features that could replace the local fiat currency. Andrea Maechler, the chair of SNB, stated that real money had provided households a way to own central bank currency. She urged the regulators to maintain the features of the Swiss fiat currency despite the technological advancement.

Reportedly the CBDC has similar features as stablecoins since they are digital tokens pegged to a currency such as a dollar or Swiss Franc. The only difference is that CBDC is issued by trusted government agencies such as central banks.

Following the depreciation in dollar value, numerous countries have invested in launching their CBDC. Switzerland has now joined the growing list of countries conducting CBDC pilot projects.

According to Atlantic Council data, roughly 18 countries across the globe are conducting CBDC pilot trials. Remarkably four countries have completed the pilot program for the wholesale CBDC. This pilot test involves large transactions conducted between financial institutions such as banks. 

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